Noncompliance with minimum reserve requirements

A bank is considered to be in noncompliance with its minimum reserve requirement if its average end-of-day balances in the reserve accounts during the maintenance period are below its requirement at the end of the period. The shortfall on the reserve requirement is subject to a penalty rate. This penalty rate, which is set by the ECB, is currently the marginal lending rate plus an add-on of 2.5 percentage points. Repeated noncompliance may raise the applicable penalty rate to the level of the marginal lending rate plus an add-on of up to 5 percentage points or double this interest rate. Moreover, the national supervisory authority must be notified should a bank have been found to be in breach of its reserve requirement.